China’s recent US$60 billion pledge to Africa is the topic of discussion across the continent from Angola to Zimbabwe, with many expressing fear that the Asian economic powerhouse’s quest for natural resources and the no conditions attached loans it’s offering will result in the continent being debt trapped.
Africa already owes China US$130 billion.
Namibia is no exception to those fears, although the country’s debt exposure to China is low at 2.6 percent of the country’s total debt of N$76.6 billion debt.
Chinese companies get most of the government construction tenders and the trade balance between China and Namibia is in favour of Namibia, mainly due to uranium exports from the Chinese owned uranium mine, Husab.
In fact, China overtook South Africa as the largest export destination for Namibian products, making up 18.3 per cent of the country’s total exports in the first quarter of 2018, according to the Namibia Statistics Agency.
Namibia mainly exports ores, nonferrous metal, aquatic products, fur skins and leather products to China while importing textile products, furniture, machinery and electronic items.
This week, President Hage Geingob and his ministers sought to put into perspective what the N$10 billion loan Namibia is seeking from China would mean in terms of debt sustainability and what projects the loan will fund.
Finance Minister, Calle Schlettwein, said no agreement has been signed with China on the upgrade of the Hosea Kutako International Airport, a project which has attracted Chinese interest.
From Schlettwein’s explanation, it seems it’s just a matter of time before the airport expansion tender is awarded to a Chinese firm.
“Nothing has been agreed on the airport, whether on the scope or size of the airport,” he said.
Geingob insisted that the airport tender and others will be awarded on Namibian terms and will involve Namibian companies.
Chinese firms are known for employing Chinese labourers and importing most materials including cement from China on their Namibian projects.
Geingob said it’s up to Namibia to dictate to China what terms it will accept for the Chinese loans. He said western companies operating in China invest on Chinese terms and Namibia can learn from this.
“Don’t blame the Chinese, we must blame ourselves,” Geingob said.
The president insisted that Namibia was a credit worthy nation, which could pick and choose who to borrow money from, implying that government would not borrow from China if it was not happy with the terms of the Chinese loan.
But Chinese loans are hard to resist.
Giving a comparison with other loans, Schlettwein said Chinese concessionary loans come with a two percent interest rate, compared to 7.7 percent on local Treasury Bills, nine percent on local bonds and seven percent on the Eurobond and loans from the African Development Bank.
Geingob said the loans from China would help create jobs through infrastructure development.
Schlettwien added that spending cuts in the last two years have slowed down the economy and the Chinese loan would be used to kick start the economy.
“Namibia must not be left behind. We are saying we are not an island. We need partners. We want to create jobs. We are craving for development.”
Information gleaned from the press conference suggest that some of the projects that may benefit from Chinese loans include the expansion of the Kalimbeza Rice Project in the Zambezi Region, road projects, housing projects, power stations and railway expansion.
Despite the country’s debt having surpassed the original benchmark of 36 percent of GDP, Geingob insisted that ‘Namibia was not swallowed up by debt.’
He said the debt of around 43 percent was below the SADC average of 60 percent. “We will not be careless,” he said, adding that the government has other options to raise money including raising taxes.
“We can borrow or increases taxes.”
Across Africa, leaders have denied that they are selling their country’s resources for cheap to China.
South African President, Cyril Ramaphosa, rejected suggestions that China is a new coloniser and that his government has sold the country by signing loan agreements for State-owned enterprises.
African Union Chairman, Paul Kagame, defended China’s aid and investment strategy as ‘deeply transformational’ and respectful of Africa’s global position.